Blockchain smart contracts: neither smart nor contracts

Core to the blockchain are smart contracts, but as Rob Knight of Mattereum explains to IGTV, they do not live up to their name.

Not that smart

Smart contracts, a key ingredient of the decentralised blockchain, are neither smart nor contracts, according to Rob Knight of Mattereum.

A smart contract allows transaction processing without the need for third parties, which is trackable but irreversible. The code though may have a bug which can be exploited. Not so smart.

Knight explained to IGTV’s Victoria Scholar at this month’s Blockchain Technology Summit that, although a smart contract is computer code aimed at enforcing a contract, it is not a legal contract in itself either.

Ricardian contracts marry code and legal contracts

Mattereum describes itself as a legal-technical interface that connects digital assets on the blockchain with goods and services in the material world. Such so-called Ricardian contracts define a legal agreement that is both readable as text, as well as executable in software. These were invented by Ian Grigg in 1996 and named after the British economist David Ricardo.

Confidence to subcontract

Knight says with such legally smart contracts in place it will enable business to be more decentralised and more confident to subcontract operations.

Smart contract risks

As has been seen with the pitfalls, the likes of TSB has faced updating its legacy banking systems, Knight says, code needs to be written much more carefully in the future if it is to be used with confidence for financial applications.

Also in our Blockchain Technology Summit series:

  • How blockchain could make business more ‘agile’

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by writer